Problem

What is the relationship between product differen…

01:42

Problem 4 Easy Difficulty

Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm $($ Firm $A)$ is large and the other firm $($ Firm $B)$ is small, as the prisoner's dilemma box in Table 10.4 shows.

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Principles of Microeconomics for AP® Courses

Chapter 10

Monopolistic Competition and Oligopoly

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Video Transcript

everyone. Today we're solving problem number four from Chapter 10 of the textbook, which deals with a prisoner's dilemma situation for a duopoly where Firm A is the larger one firm be is thes smaller one. Um, under. Given these four scenarios so typically to do awfully when you have options to do less output or sell more output, selling more output is actually more profitable for both firms. So infirm ace scenario selling more output. It's more profitable because it could make $1050. Um, and you become super rich while feeling that's 50. But even if not be only gets 20 and they make five hundred's. That's not a terrible trade off, um, and Karen comparison. If they colluded, Thembi would get a lot more money. Uh, where's a especially what this particular scenario would get. Less money it's about doesn't make any sense. So for firm, eh, it's more optimal to cheat by selling more output on, then for firm be if we examine for indeed. Actually, I'll keep what I just did preferment. So we was firm, eh? And then I'll do green with from B so infirm bees scenario. It is also more optimal to cheat by selling more output on. The reason for that is because for a B, when she thing could potentially end up with that $200 for the 800. So that's gonna be a big thing for me that they want to get but done, you know, 2500. Okay, um, so it seems like most optimal choice is gonna be regarding from A and B both cheating. Which means that this is gonna be your most like, Both are blind. I'm typically do operating. Both will try to get more output. Plus, so they're happy if you guys enjoying my explanation, please. The light. But next to it, I hope you all have a nice day. And thank you. For what?

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